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Pension shortfall report sparks exchange at Capitol

It doesn't grab the public's attention like stadiums or same-sex marriage, but the pension issue affects hundreds of thousands of public employees, and Minnesota taxpayers, who pay for a portion of the pensions.

The nonpartisan Taxpayers Association studied the three largest statewide plans, and the teacher pension funds in Minneapolis, St. Paul and Duluth. The six plans cover 600,000 current and retired public employees.

Lynn Reed from the Taxpayers AssociationMPR Photo/Laura McCallum

As of last June, the six were a total of $9.8 billion short of what they're supposed to pay retirees over the long term. Taxpayers Association Executive Director Lynn Reed says when the stock market was booming in the '90s, the plans boosted retiree pensions permanently. Then when the market plunged, the plans' resources declined too, but the increased pension payments stayed in place.

"What troubles us the most is their permanency," he said. "When you do that and don't have a shut-off mechanism, it's even more problematic."

The pension in the worst shape is the Minneapolis teachers fund, with a nearly $1 billion long-term shortfall.

The chair of the pension commission, DFL Sen. Larry Pogemiller of Minneapolis, is pushing to merge the fund with the statewide Teachers Retirement Association, which is the most solvent of the six. Pogemiller says he's been trying to fix the pension problems for years, but he's met with resistence from some legislators. He says the Taxpayers Association report could panic taxpayers unnecessarily.

Glenn DorfmanMPR Photo/Laura McCallum

"I'm not sure I agree with the notion that public pension funds are in trouble, because a lot of our major funds are in pretty good shape. There certainly are funds that are in trouble - Minneapolis teachers, I think in the near future, St. Paul teachers," he said.

Pogemiller and other lawmakers on the pension commission say they received numerous form-like e-mails after the Taxpayers Association report was released. One of the groups that funded the report admitted encouraging its members to contact legislators. The citizens who sent the e-mails said they were "outraged" by the report's findings.

"As the author of the report, do you think something's outrageous?" Pogemiller asked Reed.

"Yes, I do," Reed responded.

"And what would that be?"

"That would be paying performance bonuses out of a fund that's dying."

Pogemiller also took issue with the two organizations who paid for the report -- the Minnesota Association of Realtors and the National Association of Industrial and Office Properties. He says the two groups want to scare Minnesotans about public pensions, which make up about 2 percent of state and local government spending.

Glenn Dorfman, from the Minnesota Association of Realtors, says his organization funded the report to find out what's happening to the tax dollars spent on pensions. Dorfman says it's outrageous that pensions are not specifically listed as a line item in the state budget, making it difficult for taxpayers to track the spending.

"For four or five years, we've listened to the debate about how there's no money. And there's particularly no money for schools. So we thought it would be a good idea to find out where all the money is, because Minnesota spends a lot of money in the budget," Dorfman said.

The Taxpayers Association report recommends that the state budget list pension costs separately. Executive Director Lynn Reed says not enough money is going to public pensions, and he called for more contributions from both employees and government.

Reed acknowledged that the Taxpayers Association worked with a local TV station that did a story on the report in advance of its public release. He admitted the release was timed to coincide with the May ratings period, prompting criticism from DFL Sen. Don Betzold of Fridley.

"Mr. Reed, don't you think it might have been appropriate, rather than feeling the pressure of trying to get a report out to accommodate a TV station, you might have taken your time, got it right, got everything, done your proofreading instead of trying to accommodate a TV station's request to have a juicy report on during sweeps week? Don't you feel a little embarrassed by that?" Betzold asked.

"No. I think our report is right," Reed responded.
Despite the complaints about the study, legislators on the pension commission say it's likely to increase support for reforms they've already been pushing. They say the Legislature will likely pass measures to merge the Minneapolis fund into one that's more solvent and place a five-percent cap on future pension bonuses.